The Traditional Five C's of Credit include which of the following?

• A. Character, Capital, Capacity, Conditions, and Collateral
• B. Character, Capital, Capacity, Credit history, and Collateral
• C. Character, Capital, Capacity, Conditions, and Collateral
• D. Character, Capital, Cash flow, Conditions, and Collateral

Answer: (C)

Lenders assess credit risk by looking at five key areas that together show how likely a borrower is to repay. These are Character (trustworthiness and past behavior in repaying debts), Capital (net worth or the amount the borrower has invested), Capacity (the ability to repay based on income and existing obligations), Conditions (external factors like the economic environment and loan purpose that could affect repayment), and Collateral (assets pledged to secure the loan). The traditional five Cs always include these exact elements; the order doesn’t matter, only that all five are covered.

Choosing the option that lists Character, Capital, Capacity, Conditions, and Collateral matches the traditional set. Variants that replace Capacity with Cash flow or replace Capacity with Credit history aren’t the standard five Cs, so they don’t reflect the traditional framework.